MPM Toolkit provides practical advice for the design and deployment of marketing performance
measurement systems. It is also the name of a book with the same goal. The book and blog are both written by David Raab, Principal of Raab Associates Inc. He can
be reached at draab@raabassociates.com. The book can be purchased at www.racombooks.com

Monday, July 6, 2009

The CMO Council and Catalina Marketing’s Pointer Media Network recently released a major study on consumer loyalty in packaged goods brands. The study, Losing Loyalty: The Consumer Defection Dilemma™, draws on Catalina’s vast loyalty card transaction database to analyze the individual buying patterns of more than 32 million consumers in 2007 and 2008 across 685 leading CPG brands.

The bottom line is that “loyal” consumers are not as reliable as most of us might have guessed. “For the average brand in this study, 52% of highly loyal consumers in 2007 either reduced loyalty or completely defected from the brand in 2008.” You can download the 12 page report for details.

Not surprisingly, the report proposes to use individualized targeting services like Pointer Media Network to reduce churn by making carefully selected offers to at-risk consumers. Although the recommendation is obviously self-serving, I do think it’s correct.

But it seems to me that the implications are more fundamental. In the eternal debate about brand value, finding that loyalty evaporates more quickly than expected makes it even harder to justify marketing programs that don’t bring about an immediate, measurable return.

I’ve seen arguments (sorry, I can’t recall where) that the traditional buying model of awareness – interest – trial – purchase doesn’t correspond to reality. The survey results seem consistent with that position, in that they present consumer behavior as much less predictable than expected. This further reinforces the idea that investments with short-term results are more reliable than the long-term investments traditionally associated with brand building.

Pardon the cliche, but what we’re talking about here is a paradigm shift. If consumers don’t follow a predictable buying pattern, then brand value models based on such a pattern are not justifiable. Marketers need a fundamentally new framework to predict how their activities will affect consumer behavior. This framework may owe more to chaos theory than a linear process flow. I don’t know what they new model will look like, but recognizing that one is necessary is the first step towards creating it. If anybody out there has some candidates to offer, I’d love to hear about them.